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The food market in times of crisis
FRANCESC CASTAÑER

Right now, we still do not know what direction the current crisis, the biggest since World War II, will take nor how deep it will be.
Overall uncertainty is very high and any analysis of the branch can only be provisional.
The food industry is quite insensitive to crises. The impact is approximately 2% in developed countries, which absorb 70% of global consumption. Future growth will be based on introducing industrial food consumption with more than a billion consumers in developing countries and the growth of high value-added markets in developed countries.
Dramatic variations in raw material prices in 2007-2008 have been linked to massive speculation. However, it is true that agricultural prices tend to grow due to the lack of new croplands and improved productivity.

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Change of cycle or change of model?

The macroeconomic context
When credit difficulties of a good deal of American and European financial institutions rapidly led to the so-called credit crunch in summer
2007, few could imagine that eighteen months later we would find ourselves in the biggest overall economic crisis since World War II, which we still ignore how long it will last and in how far it will affect the economic model we have been used to in the Western world over the last sixty years.
The crisis started in relation with the assessment of some assets of financial institutions and rapidly evolved towards a real financial crisis due to the need of replacing with new capital the enormous losses featured on the balance sheets of these institutions.
During many months, the crisis affected the real economy in only some branches directly related to the financial crisis, such as building and others.
However, the continuous drainage of financial resources taken from the real economy to tackle the crisis as well as some dramatic, unjustifiable bankruptcies and frauds in the finance sector eventually led to a general crisis in which companies cut back investment and activity and consumers reduced any kind of consumption and yet more investment.
In late January 2009, the International Monetary
Fund (IMF) estimated world growth for this year at 0.5%, even though the forecast still had been 2.2% in November 2008. These data are not only the worst since World War II but they have evolved at an unprecedented breathtaking pace, which makes it very difficult to have an overall view of what the longterm impact of the crisis will be once it is over.
Opinions on its duration and depth are diverse and changing as this article is being written. In January 2009, consumption went on declining for a forth consecutive month in the US, at
-1.8%, which makes it difficult to believe in

economic recovery in the next months. The IMF estimates the evolution of the eurozone GDP at
-2% in 2009 and -2.8% in the UK.
This decrease is the more dramatic if we consider the efforts made by virtually all economic authorities around the globe to halt as quickly as possible the perverse crisis cycle that could lead us to an outright depression unless it is controlled. Interest rates are close to zero and all relevant countries in the world economy, both developed and developing, implement aid programmes of an unprecedented size. This overall uncertainty affects all economic sectors, including consumption, and more specifically the food industry.

Cycles in the food industry As is generally known, the food industry is very stable as far as its cyclical evolution is concerned.
Both in times of growth and recession, changes are relatively moderate, though definitely perceptible. As an example we may mention the dramatic difference between the 31% decline in new car sales in the US in January 2009 and the little 1.8% decrease in retail sales, basically food and hygiene and cleaning products. Although at a different rate,…